Is the Real Estate Market Going to Crash?

by Kimberly Amadeo

Five Conditions that Could Cause a Collapse

https://www.thebalance.com/is-the-real-estate-market-going-to-crash-4153139

Extra: Explaining the Boom-Bust Cycle in the U.S. Housing Market: A Reverse-Engineering Approach

by Paolo Gelain, Kevin J. Lansing and Gisle J. Natvik

https://www.frbsf.org/economic-research/files/wp2015-02.pdf

Abstract: We use a quantitative asset pricing model to "reverse-engineer" the sequences of shocks to housing demand and lending standards needed to replicate the boom-bust patterns in U.S. housing value and mortgage debt from 1993 to 2015. Conditional on the observed paths for U.S. real consumption growth, the real mortgage interest rate, and the supply of residential fixed assets, a specification with random walk expectations outperforms one with rational expectations in plausibly matching the patterns in the data. Counter factual simulations show that shocks to housing demand, housing supply, and lending standards were important, but movements in the mortgage interest rate were not.

Extra: An early warning system to predict the house price bubbles

by Christian Dreger and Konstantin A. Kholodilin

https://poseidon01.ssrn.com/delivery.php?ID=141119082090099122076118079028070007050013055041044089022119073091085031072106022096036063025103104037062104010067127086123072015075086034086114070093066098014006089028003084111068083107126125093080118113082082029024104020078093085028028093084115066&EXT=pdf&INDEX=TRUE

Abstract: In this paper, we construct the country-specific chronologies of the house price bubbles for 12 OECD countries over the period 1969: Q1-2010: Q2. These chronologies are obtained using a combination of a fundamental and a filter approaches. The resulting speculative bubble chronology is the one that provides the highest concordance between these two techniques. In addition, we suggest an early warning system based on three alternative approaches: signalling approach, logit and probit models. It is shown that the latter two models allow much more accurate predictions of the house price bubbles than the signalling approach. The prediction accuracy of the logit and probit models is high enough to make them useful in forecasting the future speculative bubbles in housing market. Thus, our method can be used by the policymakers in their attempts to timely detect the house price bubbles and attenuate their devastating effects on the domestic and world economy.